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The veteran boss, who will celebrate his 76th birthday next month, has been rewarded with a one-year contract after leading the Eagles to top-flight survival last season.
Hodgson (inset) returned to Selhurst Park in March following the departure of Patrick Vieira after a 12-match winless run in all competitions.
The former England boss achieved success in style by taking 18 points from his 10 games in charge to finish 11th, a place above Chelsea, and now he wants to do even better next season.
"I am immensely pleased and proud to be extending my time at Crystal Palace, and I would like to thank the chairman and sporting director for their continued faith in me," said Hodgson.
"I know what a fantastic squad we have here. It's a great blend of youth and potential, alongside experienced players with Premier League and international pedigree.
"I have spoken with the chairman at length and we agreed that we must be ambitious in getting the most out of such talent.
"As such, we have set ourselves the target of a top-half finish, which we believe is eminently achievable with such a fabulous group of players and the most magnificent supporters."
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ROY WANTS HIS EAGLES TO FLY

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{{magzter}} is the World's largest and fastest growing self-service, cross-platform digital newsstand with over 87 million users since its inception in 2011 and thousands of magazines and newspapers across 40+ categories and 60+ languages. Headquartered in New York, Magzter has its local presence in Amsterdam, London, Mexico City, Chennai, Mumbai, New Delhi, Bengaluru, Singapore, and will soon be expanding to other countries. Founded by global entrepreneurs, Girish Ramdas and Vijay Radhakrishnan in June 2011, Magzter enables magazine and newspaper publishers around the world to create and deliver digital editions of their titles to global consumers.